Investors interested in stocks from the Medical – Biomedical and Genetics sector have probably already heard of GSK (GSK) and Techne (TECH). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
GSK has a Zacks Rank of #2 (Buy), while Techne has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GSK has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
GSK currently has a forward P/E ratio of 10.74, while TECH has a forward P/E of 39.28. We also note that GSK has a PEG ratio of 1.24. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. TECH currently has a PEG ratio of 2.46.
Another notable valuation metric for GSK is its P/B ratio of 6.98. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. For comparison, TECH has a P/B of 7.41.
Based on these metrics and many more, GSK holds a Value grade of A, while TECH has a Value grade of D.
GSK is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that GSK is likely the superior value option right now.
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